Stockmarket Review July 2016 –

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Best month for Australian shares in almost five years. Total returns at record highs

  • Global sharemarkets lifted in early July
  • Four straight gains in the US & Australia
  • US Federal Reserve divided on next rate move

Australian and US sharemarkets rallied for four straight sessions from June 29 to July 4. But after falling on July 5 and July 7, the US Dow Jones then posted nine straight days of gains. In Australia, the ASX 200 fell on July 5 and 6, losing 1.6 per cent, but then rose for the next eight sessions, rising by almost 5 per cent.

Minutes of the US Federal Reserve June meeting were released on July 6, revealing that policymakers were split on the near-term direction for the economy. In addition to the uncertainties raised by the Brexit vote, the minutes suggested that interest rate settings would remain on hold until at least late 2016. There was also encouraging US data on July 6 showing activity in the services sector at a 7-month high.

On July 8, data revealed a 287,000 lift in US employment for the month of June although the May result was revised down to show job gains of only 11,000. In addition, hourly earnings rose by just 0.1 per cent in June. Investors were heartened by the data showing job gains but restrained wage, and in turn, price pressures.

The S&P 500 hit an intra-day high on July 8 and then a record high on July 11. On July 12 both the Dow Jones and S&P 500 indexes hit record highs. In Australia the ASX 200 hit 11-month highs on July 13. On July 14 the Bank of England left its key policy rate unchanged. But encouraging earnings from JP Morgan lifted the Dow Jones and S&P 500 indexes to fresh highs.

Encouraging economic data and earnings results underpinned the nine straight days of gains for the Dow Jones from July 11-20. But from July 21-29 the Dow Jones fell on six of the seven days, although giving back only 0.7 per cent of its previous gains. Lower oil prices weighed on the energy sector and the broader market. Still the Nasdaq fell on only two of the seven days.

And despite lower oil prices late in July, the ASX 200 fell on only one day of the eight sessions from July 20-29.

In the US, the Dow Jones rose by 2.8 per cent, the S&P 500 rose by 3.6 per cent and the Nasdaq lifted 6.6 per cent. The Japanese Nikkei rose by 6.5 per cent in July while the UK FTSE rose by 3.4 per cent and the German Dax gained 6.8 per cent.